Proposed changes to VAT from 2019

As we have informed you before, a part of the amendments to some tax laws, which are currently under review, are amendments to the Value Added Tax Act. The amendment includes an extensive amount of changes. Some of them relate to the amendment to the European Directive on VAT or the conclusions of European case law. We summarise briefly the fields affected by the proposed changes below.

VAT on vouchers

The law will govern the rules for applying VAT to the provision and acceptance of vouchers (with respect to new European rules), and single-purpose and multi-purpose vouchers will be distinguished. So far, applying VAT to vouchers was governed by the official interpretation of the Financial Administration.

VAT on cross-border electronic services provided to non-taxable entities

Currently, the place of supply is the country of the receiver of the services, which means that providers of such services have to pay VAT in the given countries. The providers have to register for VAT in the given countries or they can pay VAT via the special mini one-stop-shop (MoSS). This method can be an excessive burden for small, middle-size, or new firms. The proposal suggests that the VAT duty will arise in the recipient's country after a certain limit of provided services is reached (EUR 10,000). Certain simplification is suggested for the rules of issuing bills.

Changes to the corrections of the tax base, the tax amount, and issuing and delivering bills

The subsequent corrections of the tax base will be governed by new rules treating the moment the given correction should or could be made and the deadline for issuing a corrective tax document.

A new aspect is that the VAT payer will be obliged to make all necessary efforts to deliver the tax document in the term of its issuance; an obligation to record this could be imposed.

Extension of the possibility to reduce VAT on irrecoverable receivables

The amendment proposes the entirely new treatment for the corrections of VAT on irrecoverable receivables. The set of taxable events where the corrections can be made will be extended.

Changes to VAT on real estate

An adjustment to the deduction of VAT carried out due to a change in the use of real estate should now apply also to VAT claimed with respect to the repair of real estate amounting to more than CZK 200,000.

Renting residential premises will always be VAT exempt (effective from 2020), i.e. without the possibility of applying VAT if the premises are rented to a VAT payer who uses the premises for an economic activity.

Changes to claiming VAT deductions at registration

Newly registered payers will be able to claim VAT at registration on long-term assets acquired in a period of 60 months before the registration.